The world’s biggest crypto exchange, Binance, is battling to shore up confidence after a surge in customer withdrawals. Yet its core business remains mostly hidden from public view, a Reuters analysis of Binance’s corporate filings shows
Changpeng Zhao, founder and CEO of Binance, attends the Viva Technology conference dedicated to innovation and startups at Porte de Versailles exhibition center in Paris, France June 16, 2022. REUTERS/Benoit Tessier/File PhotoLONDON, Dec 19 - The world's biggest crypto exchange, Binance, is battling to shore up confidence after a surge in customer withdrawals and a steep drop in the value of its digital token.
Binance is not required to publish detailed financial statements because it is not a public company, unlike U.S. rival Coinbase, which is listed on the Nasdaq. Nor has Binance raised outside capital since 2018, industry data show, which means it hasn't had to share financial information with external investors since then., Binance has actively avoided oversight. Zhao approved a plan by lieutenants to "insulate" Binance's main operation from U.S.
Former regulators and ex-Binance executives say these local businesses serve as window dressing for the main unregulated exchange. There are glimpses of Binance's finances in public comments by Zhao, past company statements, blockchain data and venture capital deals. John Todaro, a senior analyst covering crypto and blockchain firms at U.S. investment bank and asset manager Needham & Company, and Joseph Edwards, an independent investment consultant, said the Reuters calculations appeared to be in the right range. Binance's promotions such as zero-fee trading and other discounts may mean the revenues were lower, Edwards said. A third crypto analyst who declined to be named also agreed with the figures.
The guarding of Binance's financial information by Zhao, a Canadian citizen who was born and raised in China, echoes the strict culture of secrecy he has enforced throughout his company's rise, the Reuters report in October showed. The article was one of a series of reports this year by the news agency on Binance's financial compliance and relationship with regulators across the world.
Reuters also asked representatives of the local Binance units and affiliates about their relationship with the main Binance exchange. Only one responded, a South African firm called FiveWest. Its managing director, Pierre van Helden, said Cape Town-based FiveWest receives a "minimal yearly license fee" from Binance to facilitate crypto derivatives trading for Binance's South African users.
Bifinity, whose annual report said it has 147 employees, does not have a website or publicly provide any contact details. The company's chief executive, Saulius Galatiltis, did not respond to requests for comment. At its registered address at a business centre in Lithuania's capital Vilnius, Bifinity is not listed on the tenants' board.
"It's really night and day," said Mark Palmer, head of digital assets research at U.S. financial services firm BTIG, of the difference between disclosures by a listed company and other offshore exchanges. U.S. prosecutors last week charged FTX founder Sam Bankman-Fried with defrauding equity investors and customers of billions of dollars. It has emerged that money was secretly moving from FTX to Bankman-Fried's hedge fund, Alameda Research, which functioned as a market maker, a dealer that deepens liquidity by buying and selling the same assets.
BNB is the fifth-largest crypto coin in circulation with a market value of around $40 billion, industry data show. Holders of the token receive discounts on Binance's trading fees. Zhao has said that Binance does not use BNB as collateral. Alameda used FTX's in-house FTT token as collateral when borrowing from FTX and other lenders.
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